Using plastic to get cash abroad

By Benjamin Salisbury

When travelling to other countries, it is important to be able to get cash without being stung by poor currency conversion rates and fees. There are many ways to get cash abroad, including using prepaid cards or dedicated websites such as Travelex and FairFX, but withdrawing cash from an ATM with your debit card, or using a credit card with features that minimise spending costs abroad may be the best options.

"Travellers need to ensure they've considered exchange rates both here and at their destination so they know the best and cheapest way to get cash," Stuart McKeggie, head of credit cards at Sainsbury's, wrote in an emailed response to questions. cheap-cash-abroad

Using plastic to get cash
Mark Huggins, managing director of AA Financial Services, stressed, in an emailed response to questions, that using your plastic carefully is key.

"Debit and credit cards can be quite a bit more costly when used abroad," he said. "Most have fees and charges, so they're best used sparingly, unless you have one that's specifically designed for use abroad."

Watch out for these fees when considering withdrawing cash abroad:

1. Loading exchange rate fees, which apply to both debit and credit cards and typically add 3% to the cost of withdrawing currency. These fees are charged when a card is used to make a withdrawal in foreign currency.

2. ATM charges, which apply to most debit and credit card transactions. When you withdraw money overseas, the card provider will add a fee, usually around 2.5% with a minimum of around £3. The charge usually only applies to foreign ATMs but watch out because you can be charged twice; once by the bank that runs the ATM and again by your own bank.

In any case, taking larger amounts out to cover a longer period is cheaper than lots of small withdrawals.

However, using a credit card to withdraw cash from an ATM counts as a cash advance. That means on top of the ATM fee, you'll be charged a cash advance fee of around 3% of the withdrawal amount, plus you'll be charged interest - usually a higher APR than the rate for purchases -- starting the day the withdrawal is made. Purchases don't draw interest until the bill due date.

Other options for getting cash overseas
Some banks and building societies offer competitive exchange rates and low charges on debit cards that match or beat the best online currency deals.

For instance, Bob Atkinson, travel expert at MoneySuperMarket.com, said Norwich and Peterborough Building Society's Gold Classic Card is a great option for travellers abroad, charging just £794 for 1,000 Euros in August 2014, compared to NatWest at £832 in the same period.

Another option is to use credit cards that cater to international travellers. There are credit cards specifically for overseas use that do not come with the loading exchange rate fee, giving a rate that even the best currency exchange outlets are unlikely to beat.

"Research shows that using some of these cards consistently gives the best exchange rates and with no hidden fees or charges, plus offering card security," Atkinson said.

For example, he said, Halifax's Clarity credit card is free to use overseas, with 1,000 Euros costing £796 in August 2014 compared to £838 with Barclaycard in the same period. The card also does not have cash advance fees or loading exchange rate fees, though cash withdrawals do gather interest until you pay off the balance.

Finally, you may choose to use a prepaid card. You load it with foreign currency, then use it to make purchases. The added advantage is your money is usually protected if you lose the card or the firm goes bust. Plus, prepaid cards tend to not have the same fees that generally come with debit and credit cards, Higgins said (though prepaid cards do come with different fees, such as reloading fees or lost card fees).

However, watch out because you get the prepaid card provider's own exchange rate, which may or may not be competitive.

A final word of caution: avoid changing money at airports because there is no other competition so you will get the worst exchange rate, Higgins warned.

See related: How to play dynamic currency conversion game, Currency cards can ease money hassles abroad

Published: 28 August 2014